BILL NUMBER: SB 522	CHAPTERED  09/02/99

	CHAPTER   307
	FILED WITH SECRETARY OF STATE   SEPTEMBER 2, 1999
	APPROVED BY GOVERNOR   SEPTEMBER 1, 1999
	PASSED THE SENATE   AUGUST 24, 1999
	PASSED THE ASSEMBLY   AUGUST 19, 1999
	AMENDED IN ASSEMBLY   JULY 1, 1999

INTRODUCED BY   Senator Wright

                        FEBRUARY 18, 1999

   An act to amend Section 9357.3 of, to add Part 8 (commencing with
Section 22970) to Division 5 of Title 2 of, to repeal Article 9
(commencing with Section 9380) of Chapter 3.5 of Part 1 of Division 2
of Title 2 of, and to repeal Article 3 (commencing with Section
20720) of Chapter 8 of Part 3 of Division 5 of Title 2 of, the
Government Code, relating to state employee benefits, and making an
appropriation therefor.


	LEGISLATIVE COUNSEL'S DIGEST


   SB 522, C. Wright.  State employee benefits.
   The Legislators' Retirement Law and the Public Employees'
Retirement Law authorize members to participate in supplemental
contributions programs.
   This bill would delete those provisions and would establish a
separate supplemental contributions program for eligible employees.
The bill would create the Supplemental Contributions Program Fund and
would continuously appropriate all moneys in that fund to the Board
of Administration of the Public Employees' Retirement System to carry
out the purposes of the program.
   Appropriation:  yes.


THE PEOPLE OF THE STATE OF CALIFORNIA DO ENACT AS FOLLOWS:


  SECTION 1.  Section 9357.3 of the Government Code is amended to
read:
   9357.3.  If the membership of a member is terminated, except by
death or retirement pursuant to this chapter, he or she shall be paid
forthwith all of his or her accumulated contributions.
  SEC. 2.  Article 9 (commencing with Section 9380) of Chapter 3.5 of
Part 1 of Division 2 of Title 2 of the Government Code is repealed.

  SEC. 3.  Article 3 (commencing with Section 20720) of Chapter 8 of
Part 3 of Division 5 of Title 2 of the Government Code is repealed.
  SEC. 4.  Part 8 (commencing with Section 22970) is added to
Division 5 of Title 2 of the Government Code, to read:

      PART 8.  SUPPLEMENTAL CONTRIBUTIONS PROGRAM
      CHAPTER 1.  GENERAL PROVISIONS

   22970.  (a) The Supplemental Contributions Program is hereby
established to be a defined contribution plan within the meaning of
subsection (i) of Section 414 of Title 26 of the United States Code.
This program shall operate solely at the option of the participants
and shall in no way obligate employers for lifetime annuity payments
to participating employees or their beneficiaries.
   (b) This part does not establish a new program, but rather
recodifies, and further defines the Supplemental Contributions
Program as amended by Chapter 576 of the Statutes of 1994, to ensure
full compliance with the applicable provisions of Title 26 of the
United States Code.
   22970.1.  The benefits provided under the Supplemental
Contributions Program shall supplement the benefits provided under
Part 3 (commencing with Section 20000) and Chapter 3.5 (commencing
with Section 9350) of Part 1 of Division 2.
   22970.2.  (a) The Supplemental Contributions Program is a
qualified profit-sharing plan under paragraph (27) of subsection (a)
of Section 401 of Title 26 of the United States Code.
   (b) The design and administration of the Supplemental
Contributions Program shall conform with the applicable provisions of
Title 26 of the United States Code and the Revenue and Taxation
Code.
   22970.3.  If any provision of this part or application thereof to
any person or circumstance is held invalid, that invalidity shall not
affect other provisions or applications of this part that can be
given effect without the invalid provision or application by a court
of competent jurisdiction application, and to this end the provisions
of this part are severable.

      CHAPTER 2.  DEFINITIONS

   22970.10.  "Account" means the account maintained with respect to
the participant that reflects the aggregate value of the following
amounts credited to the participant:
   (a) Employee after-tax contributions to the plan.
   (b) Net earnings of the Supplemental Contributions Program
allocable to the participant.
   (c) Any amount credited to the participant's account by reason of
a transfer from another plan or arrangement in accordance with
applicable laws.
   22970.11.  "Beneficiary" means any person or persons designated by
the participant pursuant to this part, or otherwise entitled by
statute, to receive distributions from the participant's account upon
the death of the participant.
   22970.12.  "Board" means the Board of Administration of the Public
Employees' Retirement System.
   22970.13.  "Compensation" means the total amount paid to an
employee for a plan year as required to be reported on the employee's
Internal Revenue Service form W-2 for income tax withholding
purposes.  This amount shall include employee contributions picked up
by the employer under paragraph (2) of subsection (h) of Section 414
of Title 26 of the United States Code; and any amounts deducted by
the employer from the participant's salary, including deductions for
tax-deferred retirement plans or insurance programs; deductions for
participation in a tax-sheltered annuity within the meaning of
Section 403(b) of Title 26 of the United States Code; deductions for
participation in an eligible deferred compensation plan within the
meaning of Section 457 of Title 26 of the United States Code; and
deductions for participation in a plan that meets the requirements of
Section l25 or subsection (k) of Section 401 of Title 26 of the
United States Code.
   22970.14.  "Disability" means a disability of permanent or
extended and uncertain duration, as determined by the board.
   22970.15.  "Early retirement age" means the age at which the
participant attains age 50 or qualifies for early retirement under
Part 3 (commencing with Section 20000).
   22970.16.  (a) "Eligible employee" means:
   (1) Any person employed by the state, the university, a school
employer, or a contracting agency who is a member of the system as
defined pursuant to the provisions of Chapter 4 (commencing with
Section 20370) of Part 3.
   (2) Any legislator, as defined pursuant to Section 9351.3, who is
a member of the Legislators' Retirement System.
   (b) The board shall determine when the members of the system who
are employed by a school employer or a contracting agency shall
become eligible employees.
   22970.17.  "Employee contribution" means the amount contributed by
the participating employee to his or her account in the plan.
   22970.18.  "Fund" means the Supplemental Contributions Program
Fund.
   22970.19.  "Net earnings" means the income earned, or losses
incurred, on the Supplemental Contributions Program Fund, less the
costs of administering the plan.
   22970.20.  "Participant" means an eligible employee who has
contributions credited under the plan.
   22970.21.  "Plan" means the Supplemental Contributions Program.
   22970.22.  "Plan year" means the 12-month period commencing on any
January 1 and ending on the following December 31.
   22970.23.  "Retirement" means termination of all employment for
the employer and completion of all conditions precedent to receiving
a distribution for retirement.
   22970.24.  "System" means the Public Employees' Retirement System.

   22970.25.  "Termination" means termination of employment by reason
of separation from all service for all employers that participate in
the system.
   22970.26.  "Valuation date" means the date as of which the assets
of the fund are valued.

      CHAPTER 3.  ADMINISTRATION OF THE PLAN

   22970.30.  (a) Except as provided in this part, the plan shall be
administered by the board in conformity with its powers and duties
for administration of the system as set forth in Part 3 (commencing
with Section 20000).  The board shall, to the extent that it
determines feasible, follow the procedures set forth in Article 7
(commencing with Section 20220) of Chapter 2 of Part 3.
   (b) The board may retain a third-party administrator to perform
investment management, recordkeeping, customer service, or other plan
administration services and the expenses associated with such
retention shall be paid from the fund.
   22970.31.  (a) The board shall adopt a plan instrument embodying
the material terms and conditions of the plan consistent with this
part and the applicable provisions of Title 26 of the United States
Code.
   (b) The board may, as it deems necessary or appropriate, amend the
plan consistent with this part and the applicable provisions of
Title 26 of the United States Code.
   22970.32.  With regard to the plan, the board shall not engage in
any transaction prohibited by subsection (b) of Section 503 of Title
26 of the United States Code.
   22970.33.  The board may require a third-party administrator,
recordkeeper, custodian, or investment manager that is contracted
with, or appointed by, the system to be subject to the duties set
forth in Section 24032.

      CHAPTER 4.  THE FUND

   22970.40.  The Supplemental Contributions Program Fund is hereby
established as a special trust fund in the State Treasury to accept
participant contributions to the plan.
   22970.41.  The board shall have control of the investment of the
assets of the fund.
   22970.42.  Notwithstanding any other provision of law, the board
may retain a bank or trust company to serve as a custodian for
safekeeping, recordkeeping, delivery, securities valuation,
investment performance reporting, or other services in connection
with investment and administration of the fund.
   22970.43.  Notwithstanding Section 13340, all moneys in the fund
are continuously appropriated, without regard to fiscal years or plan
years, to the board to carry out the purposes of this part.
   22970.44.  The assets of the fund shall be valued annually, and
may be valued more frequently as prescribed by the board.

      CHAPTER 5.  ELIGIBILITY

   22970.50.  Any person who is an eligible employee may elect, in a
manner prescribed by the board, to participate in the plan.

      CHAPTER 6.  CONTRIBUTIONS

   22970.55.  (a) Employee contributions to the plan shall be made
solely at the option of the participant.
   (b) Employee contributions may be made directly by the participant
to the plan on a periodic basis as specified by the board, or may be
withheld from the employee's compensation after taxes and submitted
by the employer through payroll deduction.
   (c) The board shall establish the minimum contribution amount.
   22970.56.  (a) Notwithstanding any other provision of law to the
contrary, contributions to the plan shall be subject to the
applicable limitations imposed by Section 415 of Title 26 of the
United States Code, as that section may be amended from time to time
and as these limits may be adjusted by the Commissioner of Internal
Revenue.
   (b) Notwithstanding any other provision of law or contract to the
contrary, the amount of compensation that is taken into account in
determining the allocations to each participant's account under the
plan shall not exceed the applicable annual compensation limitations
prescribed by paragraph (17) of subsection (a) of Section 401 of
Title 26 of the United States Code, as that section may be amended
from time to time and as that limit may be adjusted by the
Commissioner of Internal Revenue.
   (c) The plan shall provide for the return of excess annual
additions and the gain attributable thereto in accordance with
Section 415 of Title 26 of the United States Code.  In the event that
a participant participates in more than one plan of the employer,
any annual additions shall be deemed to consist first of annual
additions to this plan.
   22970.57.  (a) There shall be no employer contributions to the
plan.
   (b) There shall be no employer payment of participant
contributions on behalf of a participant in accordance with paragraph
(2) of subsection (h) of Section 414 of Title 26 of the United
States Code.

      CHAPTER 7.  PARTICIPATION ACCOUNTS

   22970.60.  Contributions made by the participant to the plan shall
be credited to the participant's account.
   22970.61.  In the case of a contribution that is made under a
mistake of fact, nothing in this part shall prohibit the return of
that contribution to the participant within one year after discovery
of the mistake.
   22970.62.  The net earnings of the fund shall be allocated to the
participant's account as of each valuation date.
   22970.63.  The value of each participant's account shall be
determined at least once annually in a manner prescribed by the
board.
   22970.64.  A participant shall receive a statement that displays
the value, or balance, of the participant's account and summarizes
any credits to the account or other transactions.

      CHAPTER 8.  RIGHTS TO ALLOCATIONS

   22970.65.  A participant has a vested right to 100 percent of the
value of the participant's account.  The right accrues when the
person becomes a participant.
   22970.66.  The right of a participant to allocations to the
participant's account is not subject to execution or any other
process whatsoever, except to the extent permitted by Section 704.110
of the Code of Civil Procedure, and is unassignable except as
specifically provided under this part.

      CHAPTER 9.  COMMUNITY PROPERTY

   22970.70.  (a) Upon the legal separation or dissolution of
marriage of a participant, the court shall include in the judgment or
a court order the date on which the parties separated.
   (b) If the community property is divided in accordance with
subdivision (a) of Section 2610 of the Family Code, the court shall
order that the allocations to the participant's account during the
marriage be divided into two separate and distinct accounts in the
name of the participant and the nonparticipant spouse, respectively.
Any contributions or earnings that are not explicitly awarded by the
judgment or court order shall be deemed the exclusive property of
the participant.
   22970.71.  For purposes of this chapter, "nonparticipant spouse"
means the spouse or the former spouse of the participant, who as a
result of petitioning the court for the division of community
property, has been awarded a portion of the allocations to the
participant's account during the marriage to the participant.
   22970.72.  The nonparticipant spouse shall have the right to a
lump sum distribution of the amount awarded to the nonparticipant
spouse by the judgment or court order.

      CHAPTER 10.  BENEFICIARY

   22970.75.  The participant may designate any person or persons as
beneficiaries to receive any amount that may be payable upon the
death of the participant pursuant to the provisions of Section
22970.88.  The beneficiary or beneficiaries shall be designated on a
form prescribed by the board, signed by the participant, and
delivered to a plan representative prior to the participant's death.

   22970.76.  Notwithstanding Section 22970.75, the participant's
beneficiary designation shall not be given effect and shall be
overridden to the extent that such a designation would impair the
rights of any surviving spouse under applicable federal or state law.

   22970.77.  Unless otherwise provided in the beneficiary
designation form, each designated beneficiary shall be entitled to
equal shares of the lump sum distribution that may be payable from
the participant's account upon the death of the participant.
   22970.78.  In the event the participant dies without a valid
beneficiary designation on file, any balance remaining in the
participant's account shall be payable to the participant's survivors
in the following order:
   (a) The participant's spouse.
   (b) The participant's natural or adopted children.
   (c) The participant's parents.
   (d) The participant's estate.

      CHAPTER 11.  ELIGIBILITY FOR DISTRIBUTION

   22970.80.  (a) Upon termination for any reason other than death,
disability, or retirement, a participant is entitled to a lump sum
distribution of the balance of the participant's account within a
reasonable time following the valuation date immediately following
the date of the application.
   (b) Application for a distribution for termination of employment
shall be made on a distribution request form and in the manner
prescribed by the board.
   (c) All employers with which the participant is employed as a
member of the system shall certify on a form prescribed by the board
that the participant's employment has terminated.
   22970.81.  (a) Upon termination, a participant may apply for a
distribution for retirement, provided the retirement date is no
earlier than the date on which the participant attains the early
retirement age pursuant to the provisions of Part 3 (commencing with
Section 20000).  The retirement benefit is a distribution of the
balance of the participant's account within a reasonable time
following the valuation date immediately following the date of the
application.
   (b) Application for a distribution for retirement shall be made on
a distribution request form and in the manner prescribed by the
board.
   (c) All employers with which the participant is employed as a
member of the system, shall certify on a form prescribed by the board
that the participant's employment has terminated.
   22970.82.  (a) Upon termination, a participant may apply for a
distribution for disability.  A distribution for disability shall
become payable only upon a determination by the board that the
participant has a disability of permanent or extended and uncertain
duration.  The disability benefit is a distribution of the balance of
the participant's account within a reasonable time following the
valuation date immediately following the date of the application.
   (b) Application for a distribution for disability shall be made on
a distribution request form and in the manner prescribed by the
board.
   (c) All employers with which the participant is employed as a
member of the system shall certify on a form prescribed by the board
that the participant's employment has terminated.
   22970.83.  (a) Upon receipt of proof of a participant's death, the
beneficiary or beneficiaries shall be entitled to a death benefit
that is a lump sum distribution of the balance remaining in the
participant's account.
   (b) If the participant died prior to termination of employment or
distribution of all of the contributions and earnings credited to the
participant's account, the lump sum distribution shall be an amount
that is equal to the balance remaining in the participant's account.

   (c) Application for the distribution shall be made on an
application form and in the manner prescribed by the board.
   22970.84.  (a) Any participant who is entitled to a distribution
may elect to receive the distribution in either of the following
forms:
   (1) A single lump sum payment.
   (2) Substantially level installment payments for a period of years
that extends no longer than the life expectancy of the participant.

   (b) Any beneficiary who is entitled to a distribution may elect to
receive the distribution in either of the following forms:
   (1) A single lump sum payment.
   (2) Substantially level installment payments for a period of years
that extends no longer than the life expectancy of the beneficiary.


      CHAPTER 12.  DISTRIBUTIONS AND ROLLOVERS

   22970.85.  Notwithstanding any other provision of this part, a
participant or beneficiary shall not be permitted to elect a
distribution under this part that does not satisfy the requirements
of paragraph (9) of subsection (a) Section 401 of Title 26 of the
United States Code, including the incidental death benefit
requirements of subparagraph (G) of paragraph (9) of subsection (a)
of Section 401 and the regulations thereunder.  The required
beginning date of distributions that reflect the entire interest of
the participant shall be as follows:
   (a) In the case of a lump sum distribution to the participant, the
lump sum payment shall be made not later than April 1 of the
calendar year following the later of the calendar year in which the
participant attains the age of 701/2 years or the calendar year in
which the participant terminates employment.
   (b) In the case of a distribution to the participant in the form
of periodic payments, payment shall begin not later than April 1 of
the calendar year following the later of the calendar year in which
the participant attains the age of 701/2 years or the calendar year
in which the participant terminates employment.
   (c) In the case of a benefit payable on account of the participant'
s death after distributions to the participant have commenced in the
form of periodic payments, the remainder of the participant's account
shall be distributed at least as rapidly as if the participant had
not died.
   (d) In the case of a benefit payable on account of the participant'
s death before distributions to the participant have commenced,
distributions shall be paid no later than December 31 of the calendar
year in which the fifth anniversary of the participant's date of
death occurs unless the benefit is paid over a period not extending
beyond the life expectancy of the beneficiary and distributions
commence not later than December 31 of the calendar year immediately
following the calendar year in which the participant died, or in the
event that the beneficiary is the participant's spouse, distributions
must commence on or before the later of either:
   (1) December 31 of the calendar year immediately following the
calendar year in which the participant dies.
   (2) December 31 of the calendar year in which the participant
would have attained the age of 701/2 years.
   22970.86.  (a) Distributions from the plan shall be made as soon
as practicable after the first valuation date immediately following
the date of the request for distribution calculated based upon the
valuation date immediately preceding the distribution.
   (b) Notwithstanding Chapter 3 (commencing with Section 13100) of
Part 1 of Division 8 of the Probate Code or any other law to the
contrary, the death benefit payable under the plan may be requested
by the beneficiary and paid as soon as practicable following receipt
of proof of the participant's death.
   22970.87.  (a) If a person becomes entitled to a distribution from
the plan that constitutes an eligible rollover distribution within
the meaning of paragraph (31) of subsection (a) of Section 401 of
Title 26 of the United States Code, the person may elect under terms
and conditions established by the board to have the eligible rollover
distribution or a portion thereof paid directly to a plan that
constitutes an eligible retirement plan within the meaning of
paragraph (31) of subsection (a) of Section 401, as specified by that
person.  Upon the exercise of the election by a person with respect
to a distribution or a portion thereof, the distribution by the plan
of the amount so designated, once distributable under the terms of
the plan, shall be made in the form of a direct rollover to the
eligible retirement plan so specified.
   (b) Notwithstanding any other provision of this part or Part 3
(commencing with Section 20000), a participant may at any time, in
writing, authorize the board to apply any or all of the participant's
account to payment of any contributions required as a member of the
system or payable to the system at the option of the member pursuant
to any provision of Part 3 (commencing with Section 20000), except
the normal monthly contributions required in Article 1 (commencing
with Section 20671) of Chapter 8 of Part 3.  Any distribution or
transfer made pursuant to this subdivision shall comply with
applicable provisions of Title 26 of the United States Code.
   22970.88.  Except as otherwise provided in this part, all
distributions shall be made directly from the fund to the participant
or beneficiary.  To the extent required by federal and state law,
income and other taxes shall be withheld from each distribution, and
the payment shall be reported to the appropriate governmental agency
or agencies.
   22970.89.  (a) The plan's obligations to a participant,
beneficiary, or nonparticipant spouse who elected a lump sum
distribution cease upon distribution of the lump sum benefit.
   (1) Deposit in the United States mail of a warrant drawn in favor
of the participant, beneficiary, or nonparticipant spouse and
addressed to the latest address on file for that person constitutes
distribution of the benefit.
   (2) Deposit in the United States mail of a notice that the
requested electronic funds transfer has been made as directed by the
participant, beneficiary, or nonparticipant spouse constitutes
distribution of the benefit.
   (3) If the participant, beneficiary, or nonparticipant spouse has
elected on a form prescribed by the board to transfer all or a
specific portion of the account that is eligible for a direct
trustee-to-trustee transfer under paragraph (31) of subsection (a) of
Section 401 of Title 26 of the United States Code to the trustee of
a qualified plan under Section 401 of Title 26 of the United States
Code, deposit in the United States mail of a notice that the
requested transfer has been made constitutes distribution of the
benefit.
   (b) The plan's obligations to a participant or beneficiary who
elected to receive a benefit in the form of partial distributions
cease upon distribution of the final payment.
   (1) Deposit in the United States mail of a warrant drawn in favor
of the participant or beneficiary and addressed to the latest address
on file for that person constitutes distribution of the benefit.
   (2) Deposit in the United States mail of a notice that the
requested electronic funds transfer has been made as directed by the
participant or beneficiary constitutes distribution of the benefit.
   (c) Distribution under paragraph (1), (2), or (3) of subdivision
(a) or paragraph (1) or (2) of subdivision (b) pursuant to the board'
s determination in good faith of the existence, identity, or other
facts relating to entitlement of persons constitutes a complete
discharge and release of the board, system, and plan from liability
for payments.
